Postdicting the Future: Five Things Congress Could Do for Music Creators That Wouldn’t Cost the Taxpayer a Dime from The Hill

This is a July 30, 2013 summary from The Hill of Chris Castle’s series that first appeared in the Huffington Post on July 26, 2013–let’s see how he did after the Music Modernization Act.

1. Create an Audit Right for Songwriters for Compulsory Licenses: One of the oldest compulsory licenses in the Copyright Act is the “mechanical license”, the statutory mandate forcing songwriters to license songs that dates from 1909. The government mandates the license and also mandates the rate that songwriters are paid—from 1909 until 1977 that rate was set at 2¢ per recording. Although that rate was eventually indexed to inflation leading to the current 9.1¢ minimum, songwriters had to dig out of a deep hole.

Getting paid is another story. This statutory license requires songwriters be sent “statements of account” for royalties—but songwriters are not allowed to conduct a “royalty compliance” examination (called an “audit”). The law requires a company officer and a CPA to certify the company’s statements—a practice rarely complied with. As recently demonstrated by Aimee Mann’s lawsuit against Medianet, if songwriters don’t get paid there’s not much they can do except sue—a costly process.

The government tells the songwriter “trust—but don’t verify.” This is an easy fix. Congress could give songwriters an audit right as they did for stakeholders in the contemporary digital performance compulsory license for satellite radio and Internet radio.

2. Allow Artists and Songwriters to Opt Out of the Compulsory License: The recent blow-up regarding the so-called “Internet Radio Fairness Act” and the related ASCAP and BMI rate court proceedings should let the Congress know that there are many artists and songwriters who want to be able to decide who gets to license their songs. Again, the digital performance compulsory license allows copyright owners to control “interactive” uses of their works—why not at least do the same for the mechanical license as well?

3. Require Digital Royalties for pre-72 Sound Recordings: Sound recordings did not receive federal copyright protection until 1972. When the Congress established the digital performance royalty, it seemed to clearly apply to all recordings and did not arbitrarily exclude recordings prior to 1972. However, this “gotcha” is used by SiriusXM and others to avoid paying great American artists whose records were released before 1972—jazz, R&B and rock legends get nothing. Congress could fix this “gotcha” and secure a fair share of digital performance royalties to these authors of our musical heritage.

4. Require All Unpaid Statutory Mechanical Royalties Be Paid to the State Unclaimed Property Offices: As Aimee Mann’s alleged in her lawsuit against the white label provider Medianet, witnesses stated that 23 percent of the songs used by Medianet are unlicensed—which could easily be millions of songs if true. And there are likely a number of digital music services that are arbitrarily holding unpaid royalties in an unauthorized “escrow.”

It seems that there could be substantial royalties controlled by the very retailers who must pay songwriters under the law, a potentially significant moral hazard. Congress could require that any “escrowed” royalties be paid over under State unclaimed property laws—a lawful “escrow.”

5. Require that Online and Offline Videos Follow the Same Rules: As online video platforms become available through Internet enabled home televisions, attention should be paid to a frequently overlooked category of songwriter—the film and television music composers. Current reporting by online video platforms makes it difficult for score composers to be paid for their work. The Congress may well ask whether those who seek to replace television should be held to the same licensing standards as television.

These are but a few ideas the Congress could be addressing that might make a difference in the lives of artists and songwriters and would cost the taxpayer very little. All leverage existing structures and bureaucracies, eliminate “gotchas,” and help to reduce the unintended consequences of government mandated compulsory licensing.